UNIVERSITY OF WATERLOO Department of Economics Economics 657 Environmental Economics Fall 2007

Transcription

1 UNIVERSITY OF WATERLOO Department of Economics Economics 657 Environmental Economics Fall 2007 Instructor: Alain-Désiré Nimubona Office: HH 212 ext Lecture Time: T & Th 3 :00-4:20 pm Lecture Location: HH 235 Office Hours: T & Th 9:30-11:00 am Course Description This course aims at providing students with the appropriate skills to diagnose the economic and organizational causes of environmental problems, and propose the adequate solutions to such problems. The first part of the course, which will last slightly more than half of the term, will emphasize the basics in environmental economics and policy. It will introduce students to the relationship between the economic activity and the environment, and review the application of the economic tools and theory to environmental problems. The normative foundations of economic analysis will be discussed including efficiency, intergenerational equity, and sustainability. The design and implementation of environmental policy will be analyzed including the use of command and control regulation, market-based instruments, and legal liability. The remainder of the course will focus on some specific and more complex issues in environmental economics. These include global warming and other international environmental problems, trade and the environment, environmental outsourcing, etc. Textbooks The students main support for this course will be the following: Perman, R., Ma, Y., McGilvray, J., and M. Common (2003), Natural Resource and Environmental Economics, Third Edition, Pearson / Addison Wesley. This textbook will be available for purchase at the university bookstore. In addition, we will draw some materials from scientific journals - such as Journal of Environmental Economics and Management, Environmental and Resource Economics, Resource and Energy Economics, among others - and the following references: Baumol, W. J. and W. E. Oates (1988), The Theory of Environmental Policy, Second Edition, Cambridge University Press.

2 Copeland, B. R. and M. S. Taylor (2003), Trade and the Environment: Theory and Evidence, Princeton University Press. Croci, E. (2005), The Handbook of Environmental Voluntary Agreements: Design, Implementation and Evaluation Issues, Springer. Freeman, A. M. (2003), The Measurement of Environmental and Resource Values: Theory and Methods, Resources for the Future Press. Kolstad, C. D. (2000), Environmental Economics, Oxford University Press. Stavins, R. N. (2005), Economics of the Environment: Selected Readings, Fifth Edition, W.W. Norton. Sterner, T. (2002), Policy Instruments for Environmental and Natural Resource Management, Resources for the Future Press. Tietenberg, T. H. (2006), Emissions Trading: Principles and Practice, Resources for the Future Press. These additional textbooks, as well as journal articles that are not available online, will be on reserve in the library. Evaluation Grades in this course will be determined based on: A midterm exam (30%): in-class evaluation to be held on Tuesday October 30 th. Two 45-minute presentations of two scientific papers about the selected topics to be covered in the course (30%): during the second half of the term. A research paper on any environmental related issue (30%). You may choose to do a critical literature review, propose an economic model, or conduct an econometric analysis or a case study. Note that the topic must be approved in advance by the instructor. Due dates concerning this research paper are as follows: o A one page description of the specific question you intend to explore: due in class on Tuesday October 23 rd. o An outline of the paper as well as a bibliography of about 10 academic papers: due in class on Tuesday November 13 th. o Final paper: due on Thursday December 6 th. Class participation (10%). Over the first half of the term, every student will be required to present two five-minute summaries of articles read in preparation to the course. Those short presentations, as well as the long ones, will be followed by a discussion period in which I expect everyone to be active participants. Therefore, if you are not scheduled for a presentation, you are still expected to do the readings. 2

3 Course Outline and Readings 1. Introduction: the Environment and Economics [Week 1] *Perman et al. (Chapter 1) Baumol and Oates (Chapter 1) Kolstad (Chapters 1 & 2) Cropper, M. L. and W. E. Oates (1992), Environmental Economics: A Survey, Journal of Economic Literature, 30: *Deacon, R. et al (1998), Research Trends and Opportunities in Environmental and Natural Resource Economics, Environmental and Resource Economics, 11: Fullerton, D. and R. Stavins (1998), How Economists See the Environment, Nature, 395(6701): *Hahn, R. W. (1989), Economic Prescriptions for Environmental Problems: How the Patient Followed the Doctor's Orders," Journal of Economic Perspectives, 3(2): Portney, P. (1990), Economics and the Clean Air Act, Journal of Economic Perspectives, 4(4): * (2000), Environmental Problems and Policy, Journal of Economic Perspectives, 14: Intergenerational Equity and Sustainability [Week 2] *Perman et al. (Chapters 2, 3 & 4) *Brander, J. A. (2007), Viewpoint: Sustainability: Malthus Revisited?, Canadian Journal of Economics, 40(1): *Kneese, A. V. and W. D. Schulze (1985), Ethics and Environmental Economics, Chapter 5 in A.V. Kneese and J. L. Sweeney (eds), Handbook of Natural Resource and Energy Economics, vol I, North-Holland, Amsterdam. D'Arge, R. C., W. D. Schulze, and D. S. Brookshire (1982), Carbon Dioxide and Intergenerational Choice, American Economic Review, 72(2): Page, T. (1991), Sustainability and the Problem of Valuation, Chapter 5 in Costanza, R., Ecological Economics: The Science and Management of Sustainability, Columbia University Press. 3

4 3. Efficiency, Optimality, and Market Failure [Week 3] *Perman et al. (Chapter 5) *Baumol and Oates (Chapters 1, 2 & 3) Kolstad (4, 5, 6) *Coase, R. H. (1960), The problem of Social Cost, Journal of Law and Economics, 3: Hausman, J. (1981), Exact Consumer's Surplus and Deadweight Loss, American Economic Review, 71(4): Weitzman, M. L. (2000), Economic Profitability versus Ecological Entropy, Quarterly Journal of Economics, 115(1): Willig, R. (1976), Consumer's Surplus without Apology, American Economic Review, 66(4): Design and Implementation of Environmental Policy [Weeks 4, 5 & 6] 4.1. Goals, principles, and constraints [Week 4] *Perman et al. (Chapter 6) Baumol and Oates (Chapters 11 & 17) *Kolstad, C. D. (1987), Uniformity vs. Differentiation in Regulating Externalities, Journal of Environmental Economics and Management, 14(4): Rose-Ackerman, S. (1973), Effluent Charges: a Critique, Canadian Journal of Economics, 6(4): Instrument Choice and Policy Implementation [Weeks 5 & 6] *Perman et al. (Chapters 7 & 8) Baumol and Oates (Chapters 5, 12 & 14) Kolstad ( Chapters 4, 5, 7, 8, 9, & 10) *Duggan, J. and J. Roberts (2002), Implementing the Efficient Allocation of Pollution, American Economic Review, 92(4): *Harford, J. D. (1987), Self-reporting of Pollution and the Firm's Behaviour under Imperfectly Enforceable Regulations, Journal of Environmental Economics and Management, 14(3):

5 *Harrington, W. (1988), Enforcement Leverage when Penalties are Restricted, Journal of Public Economics, 37(1): Parry, I. W. H. (1995), Pollution Taxes and Revenue Recycling, Journal of Environmental Economics Management, 29(3): S64-S77. Polinsky, A. M. (1979), Notes on the Symmetry of Taxes and Subsidies in Pollution Control, Canadian Journal of Economics, 12(1): *Segerson, K. (1988), Uncertainty and Incentives for Nonpoint Pollution Control, Journal of Environmental Economics and Management, 15(1): *Sinclair-Desgagné, B. and E. Gozlan (2003), A Theory of Environmental Risk Disclosure, Journal of Environmental Economics and Management, 45(2): Tietenberg, T. (1990), Economic Instruments for Environmental Regulation, Oxford Review of Economic Policy, 6(1): *Weitzman, M. L. (1974), Prices versus Quantities, Review of Economic Studies, 41(4): Economic Valuation of the Environment [Week 8] *Perman et al. (Chapters 11 and 12) Freeman (Chapters 2, 4, 5, 6 & 12) Kolstad (Chapters 15, 16, 17) *Adamowicz et al. (1994), Combining Revealed and Stated Preference Methods for Valuing Environmental Amenities, Journal of Environmental Economics and Management, 26(3): Diamond, P. and J. Hausman (1994), Contingent Valuation: Is Some Number Better than No Number, Journal of Economic Perspectives, 8(4): *Dickie, M. and S. Gerking (1991), Willingness to Pay for Ozone Control: Inferences from the Demand for Medical Care, Journal of Environmental Economics and Management, 21(1): Hanneman, M. (1991), Willingness to Pay versus Willingness to Sell: How Much Can They Differ?, American Economic Review, 81(3): * (1994), Valuing the Environment Through Contingent Valuation, Journal of Economic Perspectives, 8(4): *Kolstad, C. D. and R. M. Guzman (1999), Information and the Divergence Between Willingness to Accept and Willingness to Pay, Journal of Environmental Economics and Management, 38(1):

6 Bartik, T. J. (1987), The Estimation of Demand Parameters in Hedonic Price Models, Journal of Political Economy, 95(1): Selected Topics [Weeks 9, 10, 11 & 12] 6.1. Environmental Policy and Market Structure *Baumol and Oates (Chapter 6) Barnett, A. H. (1980), The Pigouvian Tax Rule under Monopoly, American Economic Review, 70(5): *Buchanan, J. M. (1969), External Diseconomies, Corrective Taxes, and Market Structure, American Economic Review, 59(1): *Conrad, K. and J. Wang (1993), The Effect of Emission Taxes and Abatement Subsidies on Market Structure, International Journal of Industrial Organization, 11: Hahn, R. W. (1984), Market Power and Transferable Property Rights, Quarterly Journal of Economics, 99(4): *Katsoulacos, Y. and A. Xepapadeas (1995), Environmental Policy under Oligopoly with Endogenous Market Structure, Scandinavian Journal of Economics, 97: Lee, S.H. (1999), "Optimal Taxation for Polluting Oligopolists with Endogenous Market Structure", Journal of Regulatory Economics, 15: Emissions Trading Schemes Baumol and Oates (Chapter 12) Stavins (Chapters 20, 21 & 28) *Tietenberg (Chapters 1, 2 & 3) Burtraw, D. and K. Palmer (2003), The Paparazzi Take a Look at a Living Legend: The SO2 Cap-and-Trade Program for Power Plants in the United States, Discussion Paper 03-15, Resources for the Future. *Böhringer, C. and A. Lange (2005), Economic Implications of Alternative Allocation Schemes for Emission Allowances, Scandinavian Journal of Economics, 107(3): Cason, T. N. (1995), An Experimental Investigation of Seller Incentives in the EPA s Emissions Trading Auction, American Economic Review, 85(4):

7 * and C. R. Plott (1996), EPA's New Emissions Trading Mechanism: A Laboratory Evaluation, Journal of Environmental Economics and Management, 30(2): Voluntary Approaches *Croci (Chapters 1, 5 & 6) Alberini, A. and K. Segerson (2002), Assessing Voluntary Programs to Improve Environmental Quality, Environmental and Resource Economics, 22: Arora, S. and T. N. Cason (1995), An Experiment in Voluntary Environmental Regulation: Participation in EPA s 33/50 Program, Journal of Environmental Economics and Management, 28(3): *Lyon, T. P. and J. W. Maxwell (2003), Self-Regulation, Taxation and Public Voluntary Environmental Agreements, Journal of Public Economics, 87: Montero, J. P. (1999), Voluntary Compliance with Market Based Environmental Policy: Evidence from the US Acid Rain Program, Journal of Political Economy, 107: *Segerson, K. and T. J. Miceli (1998), Voluntary Environmental Agreements: Good or Bad News for Environmental Protection?, Journal of Environmental Economics and Management, 36(2): Uncertainty, Irreversibility, Option Value, and the Precautionary Principle *Perman et al. (Chapter 13) Kolstad (Chapter 12) Arrow, K. J. and A. C. Fisher (1974), Environmental Preservation, Uncertainty, and Irreversibility, Quarterly Journal of Economics, 88(2): *Barrieu, P. and B. Sinclair-Desgagné (2006), On Precautionary Policies, Management Science, 52(8): *Fisher, A. C. (2000), Investment under Uncertainty and Option Value in Environmental Economics, Resource and Energy Economics, 22: Gollier, C. and N. Treich (2003), Decision-Making under Scientific Uncertainty: The Economics of the Precautionary Principle, Journal of Risk and Uncertainty, 27: *Insley, M. (2003), On the Option to Invest in Pollution Control under a Regime of Tradable Emissions Allowances, Canadian Journal of Economics, 35(4): Viscusi, K. (1988), Irreversible Environmental Investments with Uncertain Benefit Levels, Journal of Environmental Economics and Management, 15(2):

8 6.5. Transboundary Pollution *Perman (Chapter 10) *Barrett, S. (1994), Self-Enforcing International Environmental Agreements," Oxford Economic Papers, 46: (1997), The Strategy of Trade Sanctions in International Environmental Agreements, Resource and Energy Economics, 19: * (2006), Kyoto and Beyond: Alternative Approaches to Global Warming, American Economic Review 96(2): McKibbin, W. J. and P. J. Wilcoxen (2002), The Role of Economics in Climate Change Policy, Journal of Economic Perspectives, 16(2): Nordhaus, W. (1993), Reflections on the Economics of Climate Change, Journal of Economic Perspectives, 7(4): * (2006), After Kyoto: Alternative Mechanisms to Control Global Warming, American Economic Review, Papers and Proceedings, 96(2): Trade, Growth and the Environment *Chichilnisky, G. (1994), North-South Trade and the Global Environment, American Economic Review, 84(4): Conrad, K. (1993), Taxes and Subsidies for Pollution-Intensive Industries as Trade Policy, Journal of Environmental Economics and Management, 25(2): *Copeland, B. (2000), Trade and Environment: Policy Linkages, Environment and Development Economics, 5: * and M. S. Taylor (2004), Trade, Growth, and the Environment, Journal of Economic Literature: 42 (1): Dasgupta, S., Laplante, B., H. Wang and, D. Wheeler (2002), Confronting the Environmental Kuznets Curve, Journal of Economic Perspectives, 16(1): Hamilton, S. F. and T. Requate (2004), Vertical Structure and Strategic Environmental Trade Policy, Journal of Environmental Economics and Management, 47(2): *Lopez, R. and S. Mitra (2000), Corruption, Pollution and the Kuznets Environment Curve, Journal of Environmental Economics and Management, 40(2): Stern, D. I. and M. S. Common (2001), Is There an Environmental Kuznets Curve for Sulfur?, Journal of Environmental Economics and Management, 41(2):

9 6.7. Environmental Outsourcing and the Eco-Industry Canton, J., Soubeyran, A. and H. Stahn (2007), Optimal Environmental Policy, Vertical Structure and Imperfect Competition, Environmental and Resource Economics, forthcoming. *David, M. and B. Sinclair-Desgagné (2005), Environmental Regulation and the Eco- Industry, Journal of Regulatory Economics, 28(2): *Feess, E. and G. Muehlheusser (2002), Strategic Environmental Policy, Clean Technologies and the Learning Curve, Environmental and Resource Economics, 23: Karliner, J. (1994), The Environment Industry: Profiting from Pollution, The Ecologist, 24: Lanjouw, J. O. and A. Mody (1996), Innovation and the International Diffusion of Environmental Responsive Technology, Research Policy, 25: Nimubona, A. D. and B. Sinclair-Desgagné (2005), The Pigouvian Tax Rule in the Presence of an Eco-industry, FEEM. Nota de lavoro *Organization for Economic Cooperation and Development (1996), The Global Environmental Goods and Services Industry, OECD. *Requate, T. (2005), Timing and Commitment of Environmental Policy, Adoption of New Technology, and Repercussions on R&D, Environmental and Resource Economics, 31: Political Economy of Environmental Policy *Boyer, M. and J-J. Laffont (1999), Toward a Political Theory of the Emergence of Environmental Incentive Regulation, Rand Journal of Economics, 30: Dietz, F. J. and H. R. J. Vollenbergh (1999), Explaining Instrument Choice in Environmental Policies, in J.C.J.M. van den Bergh, Editor, Handbook of Environmental and Resource Economics, Edward Elgar: *Hahn, R. (1990), The Political Economy of Environmental Regulation: Towards a Unifying Framework, Public Choice, 65: *Noll, R. (1983), The Political Foundations of Regulatory Policy, Journal of Institutional and Theoretical Economics, 139: Laffont, J-J. and J. Tirole (1993), A Theory of Incentives in Procurement and Regulation, MIT Press. Stavins, R. (2004), Introduction to the Political Economy of Environmental Regulation, Harvard University, Faculty Research Working Papers Series, RWP

10 Note: - Readings marked with a star should be read in advance of the class. - Some topics may require more or less emphasis than planned above. To reflect that need, this outline may therefore be updated as we move through the term. Note on avoidance of academic offences: All students registered in the courses of the Faculty of Arts are expected to know what constitutes academic integrity, to avoid committing academic offences, and to take responsibility for their actions. When the commission of an offence is established, disciplinary penalties will be imposed in accord with Policy #71 (Student Academic Discipline). For information on categories of offences and types of penalties, students are directed to consult the summary of Policy #71 (Student Academic Discipline), If you need help in learning what constitutes an academic offence, how to avoid offences such as plagiarism, cheating, and double submission, how to follow appropriate rules with respect to group work and collaboration; or if you need clarification of aspects of the discipline policy, ask your course instructor for guidance. Other resources regarding the discipline policy are your graduate advisor and the Associate Dean of Graduate Affairs. Students who believe that they have been wrongfully or unjustly penalized have the right to grieve; refer to Policy #70 (Student Grievance), Note for students with disabilities: The Office for Persons with Disabilities (OPD), located in NH1132, collaborates with all academic departments to arrange appropriate accommodations for students with disabilities without compromising the academic integrity of the curriculum. If you require academic accommodations to lessen the impact of your disability, please register with the OPD at the beginning of each academic term. 10